Mort Rosenthal: The Software Salesman

In 1982, when Rosenthal founded reseller Corporate Software, PC software was sold either through retail outlets or catalogs. The idea of a reseller catering to corporate software buyers and offering service and support along with the "bits" was novel.

Rosenthal's strategy was so novel, in fact, that Lotus Development,then the big game in town with its killer spreadsheet app Lotus 1-2-3,refused to let Corporate Software sell its goods until it had a retail presence. So the reseller opened a store and, in the process, gained the all-important Lotus authorization.

"I made Mort buy some little storefront in 1983," said John Shagoury, who at the time was head of Lotus' distribution operation and later was hired,twice,by Corporate Software.

That sleepy Danvers, Mass., shop turned out to be a front for what Rosenthal was building. "The poor kid who ran it said it was the most depressing time of his life. If he ever sold anything, they yelled at him because he was messing up the books," said Jeff Tarter, editor of SoftLetter, a Watertown, Mass.-based software industry newsletter.

In the late 1980s, when Rosenthal took Corporate Software public, he prevailed upon Lotus to let him lose the store and keep the authorization. He remembers the saga well.

"Lotus made us do all sorts of things," Rosenthal said. "We were one of the first three beta sites for Notes. We used it longer than Pricewaterhouse and eventually sold 40 percent of it. But when Notes launched, [Lotus] would not let us sell it."

When Lotus launched Notes, it sold the groupware product directly to end users and took years to develop a channel plan for it. This irked resellers such as Rosenthal. "Mort will say he, in fact, created Notes, everybody was B.S. [that] we went direct," said former Lotus Chairman Jim Manzi, a close friend of Rosenthal's.

Many stories of Rosenthal's passion for the business still circulate, and a lot of those tales have him crawling across tables to confront vendors nose to nose. Some reports even have Rosenthal barking and growling like a dog to make his point. "The thing about those stories is anyone who knows Mort believes them," said Chris Ward, who used to handle communications for Corporate Software. "With other people, you might take them with a grain of salt."

Larry McMenamy, former head of Lotus' channel programs, was a witness. "He came right across that table at me, right in my face. It was all I could do not to hit him," said McMenamy. Such incidents typically arose when vendors approached Corporate Software at the end of a quarter asking for a large software buy,the notorious "channel stuffing" maneuver. "Of course, we couldn't call it that," McMenamy said.

Asked if he remembers these events, Rosenthal shrugs. "It sounds like something I'd do," he said.

Rosenthal instantly realized what any new program meant to his business, said McMenamy. "We wouldn't even have finished the presentation, and he knew what the impact would be on his bottom line," he said.

"He is so smart,a genius in these math things," McMenamy said. "He figured a percentage point here, a half a point there. By the time I'd get back to my office, he'd have already called Manzi. It took other resellers days and weeks to figure that stuff out."

Rosenthal and his team built Corporate Software not just by selling software products,the big names then were Ashton-Tate's dBase, Lotus 1-2-3 and WordPerfect,but also by outsourcing software licensing and software asset management.

There was also a little company called Microsoft.

At the time, the future software titan was in what Rosenthal called "its Multiplan era," well before Word, Excel and Windows had taken the world by storm. But Rosenthal courted Microsoft, and his company ran Microsoft seminars. "This was back when Bill Gates and Paul Allen were running a small show. But even then they were saying 'a Microsoft product on every desk,' " Rosenthal said. Later on, Microsoft became Corporate Software's No. 1 vendor, he said.

Mark Pearson, a 15-year Corporate Software veteran, said Rosenthal deserves kudos for such vision. "Mort is a leader who is inspirational, passionate and creative, and Corporate Software was a complete extension of him," Pearson said. "It was the first reseller to get involved with [software] upgrades. We helped design Microsoft's first licensing program. We were the first reseller to champion Notes."

Yet software wasn't Rosenthal's initial passion. Though he earned an undergraduate degree at Yale and an M.B.A. at Columbia, his heart was in music. For the summers of 1974-76, he worked at the Montreux Jazz Festival, rubbing elbows with stars of the musical world such as Rolling Stones bassist Bill Wyman and Anita Pallenberg, the significant other of Stones guitarist Keith Richards. "Muddy Waters once called me a honky on live television. It was done endearingly,I think," Rosenthal said. In the late 1970s at a peace rally in New York, he even met John Lennon and Yoko Ono.

His first computer-related job came around 1979, when he began working for reseller Infocom. There, he took it upon himself to tout Zork, one of the first PC adventure games. "I was the only employee, and I got fired over a deal with John Roach, [then chairman] at Tandy. I was going to cut the price to get the stuff into every Radio Shack store."

That notion eventually spawned Corporate Software, which aimed to simplify the purchase of PC software for businesses and follow it up with premium support and service.

The company pioneered the outsourced help desk, and that expertise evolved into software asset management, a model in which the management of licenses is as important,if not more so,than the actual software purchase. Corporate Software, and later entries such as Software Spectrum, promised to keep corporations up and running and legal.

"Mort was the first one to really put together a bunch of premium services and wonderful catalogs, [with a] listing of products, upgrades, immense amounts of information and asset management stuff," said SoftLetter's Tarter. "[Rosenthal and Corporate Software] were the ones that got into the upgrade business when Lotus wouldn't do corporate deals for under 500 seats. Lotus wouldn't sell upgrades except in lots of 500. Mort came in and sold you whatever you wanted. So he got all that upgrade business until Lotus wised up."

The Corporate Software catalog became a bible for software buyers and propelled the reseller's business. Rosenthal launched the company's IPO in 1987, and subsequent public offerings followed in 1988 and 1991.

But just two years later, Rosenthal engineered a $94 million management buyout to take Corporate Software private again. He said Wall Street didn't know how to value his company and decided that it was better to go it alone. In 1994, Corporate Software continued on its growth path when it acquired 800 Software from Digital Equipment.

But Corporate Software soon had to face a key reality of the software business: price matters.

"The premise of Corporate Software was that people would pay a premium for premium stuff. [Rosenthal] would come out with a portfolio of really slick services, and the customers said, 'Great. But you still have to beat the discounters' prices,' " Tarter said. "There's only been 10,000 years of retail that's worked exactly the same way."

It was the same lesson that hundreds of dot-com companies learned the hard way in the past year or so.

"People want wonderful stuff, but for little money. Babylonian grain merchants did exactly the same thing," Tarter said. "[Rosenthal] was probably the first person in business-related software sales to profoundly misunderstand what customers are willing to pay for."

In 1995, Corporate Software merged with the Global Software Services unit of R.R. Donnelley to form Stream International, the world's largest software reseller with sales of $1.8 billion. Rosenthal ceased his involvement in Stream's day-to-day operations in late 1996, saying at the time that the computer business had pretty much gone crazy.

"There's so much at stake, or perceived to be at stake, and there are some pretty uneconomic things being done by the players," Rosenthal said in a CRN interview following his departure from Stream. "What I do is business-model stuff, and business models require a market that behaves rationally."

Not long afterward, Rosenthal took on a whole new career, founding Wellspace, an alternative health-care organization based in Cambridge, Mass. Still, those in the software business recall "Mad Dog Mort" stories and how Rosenthal reflected the color of his rock-and-roll and jazz roots.

Ward remembers Rosenthal's love of gadgets and his eagerness to try the latest and greatest. "He always wanted the latest toy," Ward said. "Microsoft one year came out with some speech-driven computer-command stuff, and he was the first to get the beta on his computer. The stuff didn't work, so he'd just be yelling at his PC, 'Backspace, you stupid f---.' He tried it for a week, and everyone in the office begged him to get rid of it."

Never one to deny his passion, Rosenthal also admits to keeping a baseball bat in his office "for cracking coconuts." It remains unclear, however, whether those coconuts are of the literal or metaphorical sort.